The New Google-AAP Settlement: Some Questions and Antitrust Speculations

The Publishers Weekly reported yesterday that “The Association of American Publishers (on behalf of five named publisher plaintiffs) and Google today announced they have settled their long-running litigation over Google’s library book scanning. According to a statement from the AAP, Google is said to “acknowledge the rights and interests of copyright-holders,” and U.S. publishers can “choose to make available or choose to remove their books and journals digitized by Google for its Library Project.”

The PW also reports that “publishers deciding to have their scanned works included in the Google database can opt to receive a digital copy for their use”, which, they can then commercialize or make available in other search engines, and that “[i]t is unclear if there was any payment involved, whether for legal fees or otherwise, as further terms of the agreement are confidential.”

Since the publishers’ lawsuit, unlike that of the Authors’ Guild was not a class action, the settlement doesn’t need to be filed and scrutinized by the court.

The PW also quotes New York Law School Professor James Grimmelmann‘s observation that “[t]he publicly described terms sound indistinguishable from the terms Google has offered to its print partners for years. If that’s all, it’s hard to understand why this deal took so long.”

If this is all that matters in the settlement, it raises two questions for the antitrust lawyer in me:

Why now?

Why is the settlement confidential?

The NY Times offers the following explanation to the first question: “Digital books were a new and daunting prospect when the publishers first sued Google seven years ago, but they have now become commonplace.” And qouting James (who is unquestionably a Googlesque-size human source for all things Google Books), the NY Times adds, “[t]hey had this lawsuit hanging around for years, and basically the publishers have all moved on. They are selling digitally now. That’s the future. This just memorializes the transition.”

This makes sense, but it doesn’t answer the question of why is the settlement confidential. One possible explanation is that if the settlement indeed involves what Google had offered publishers all along, then keeping the settlement itself confidential simply allows the publishers to save face and avoid the embarrassment of publicly withdrawing their lawsuit.

But the antitrust skeptic in me suspects that there might be something more, which connects the two questions. I have always suspected that the publishers lawsuit wasn’t motivated solely by the publishers’ strong belief that Google had wronged them when it scanned their books and displayed snippets without permission, but rather was intended to be used as leverage to reach a settlement that would allow the publishers collectively to gain control over the transition and development of the e-book industry. Their first attempt to collectively determine these developments, and the antitrust concerns that this attempt raised, were one of the feature of the earlier Google Books Settlements and one of the causes of its rejection by Judge Chin. I suspect that the publishers were still hoping to reach another collusive settlement, but eventually realized that they would have to abandon this dream after the dealings of some of them with Apple got them into serious antitrust troubles. This may be an alternative answer to question 1: why now.

But this hypothesis also suggests another answer to question 2: why confidential. Clearly, if the settlement has collusive elements in it, it makes sense to make them unknown. I don’t suspect that it contains anything that would be an obvious antitrust violation (such as price fixing or a collective decision about a business model), but if the new settlement contains more than what Google had offered all along, but which is not blatantly collusive, it make sense to keep it remote from public scrutiny as much as possible. Some details reported yesterday on paidContent suggest that this might be the case. PaidContent reports that “a Google executive revealed in a phone interview with paidContent that the company “has very robust plans to increase analytics” with publishers. This is significant because publishers have long been frustrated by Amazon’s unwillingness to share data like customer profiles and buying habits.”

Amazon might have been unwilling to share this kind of data with publishers for two (or more) reasons: first, the data is valuable. Amazon wouldn’t share it for free. Second, consumer value their privacy (maybe not as much as we sometimes think, and maybe not as much as privacy experts believe they should) but there is some sensitivity among consumers about the data that is collected about them, and even more, when the data is shared with others. This means that privacy is a dimension of e-books sellers’ product, and Amazon might have concluded that what publishers might offer it in return to sharing the data would be less than what consumers would offer it if it would not share. If the publishers were allowed to collude and force Amazon to share the date with them Amazon’s calculus might have been different, but antitrust law would prevent the publishers from doing that.

The situation with Google is somewhat different. Presumably, like Amazon, Google would not share the data for free, but the copyright lawsuit gave the publishers some leverage which they would not have over Amazon, and settling the lawsuit gave them an opportunity to cooperate and negotiate with Google collectively in a way that may not trigger obvious antitrust alarms. Therefore, if the settlement contains an agreement about sharing users’ data, and the level of sharing is different than that which publishers would be able to negotiate individually, this may still be an antitrust issue. Surely, not as obvious as an agreement to fix prices, but an issue nonetheless.

Google and the publishers may not be required to file their settlement agreement with court or otherwise make it public, but the DOJ might still wish to take a look.